Gold remains solidly anchored near its recent record highs, trading above $2,500 an ounce, but its bullish momentum faces challenges as the U.S. dollar shows signs of being oversold. Nicky Shiels, Head of Research and Metals Strategy at MKS PAMP, suggests that a closer look at gold’s performance against the euro could provide clearer insights into the precious metal’s future direction.
In her recent analysis, Shiels emphasized the importance of monitoring gold’s performance against the euro (XAUEUR) as it trades near historical peaks. She noted that XAUEUR offers a clearer picture of “gold-only” demand, eliminating the influence of broader U.S. dollar volatility.
While U.S. gold futures markets are closed for the Labor Day holiday, spot gold continues to trade globally. Currently, gold is holding steady against the euro at €2,259.60 an ounce, showing little change on the day.
Shiels highlighted that gold is facing significant resistance against the euro, which could signal a potential shift in trend. “XAUEUR has remained within a broad range of approximately €150 since the breakout in March and April this year,” Shiels noted. “It is currently at a critical juncture in the high €2200s. There have been six unsuccessful attempts to break through the €2270-2280 range since the April peak, with the all-time high in euro terms standing at €2287 per ounce.”
Despite gold’s struggle to surpass its highs from March and April, Shiels observed that the metal is establishing a strong base around €2,200 an ounce. She suggested that even though prices are consolidating, gold maintains an upward trend against the euro, advising investors to consider buying on dips.
“Conditions are ripe for a potential adjustment—upward or downward—given that it has been six months since the breakout in March. However, we believe the peak is not yet in sight. XAUEUR still shows significant strength as a proxy for genuine demand, and it’s premature to predict a top at $2,500/€2,300,” Shiels concluded.
In recent weeks, gold has seen a surge in bullish sentiment, driven by market anticipation of the Federal Reserve initiating its easing cycle. Expectations of a 25-basis-point cut, with a slim chance of a 50-basis-point reduction, have helped gold prices rise above $2,500 an ounce. The resulting selloff in the U.S. dollar has contributed to gold’s gains, although some analysts believe a 50-basis-point cut may be unlikely, potentially providing short-term support for the dollar.
Conversely, gold’s strength is also evident in euro terms. With the European Central Bank expected to lower interest rates again in September due to easing inflation pressures, gold remains supported in the European market.
